North American FX Open - Dollar in demand as market leans towards 25bbps Fed cut

The DOLLAR's post payroll recovery has extended at a steady pace in overnight trade, as the market is now leaning to the Fed starting their easing cycle in nine days time with a 25bps move. The Fed's embargo period has now started, so the market is just left with data updates to influence their interest rate expectations. CPI on Wednesday is the main release, but markets will cast a close eye on the NFIB Small Business Optimism survey tomorrow and the jobless claims figures on Thursday.

Usd/Jpy has risen steadily to 143.78 so far, helped in part by the Japanese final Q2 GDP just missing expectations at 2.9% annualized q/q vs the 3.2% consensus and 3.1% last.

Meanwhile Eur/Usd has reversed down to 1.1037 and is nearing last week's lows down at 1.1026, after a disappointing fall in the EZ Sentix Investor Confidence survey for September. The reading fell to minus 15.4 from minus 13.9 in August, below the minus 12.2 consensus forecast.

Aud/Usd dipped below the 0.6650 level for the first time since August 16th, with the Aussie weakened by iron ore hitting a 22 month low, south of Usd 90 per ton amid a drop in demand from biggest buyer China.

Chinese deflationary fears remain to the fore after CPI and PPI for August missed expectations, at just 0.6% y/y and -1.7% y/y respectively. Bbg wrote that China’s core inflation cooled to the weakest in more than three years, adding to signs the administration is struggling to get households spending; further putting the annual 5.0% growth target under pressure and boosting the case for stronger stimulus.

Republican candidate for the US presidency Donald Trump pledged to slap a 100% tariff on goods from countries that shun the USD and according to a NYT-Siena College poll he leads Kamala Harris 48% to 47%, suggesting the VP’s initial wave of support may be stalling, as we wait for the first debate between the pair tomorrow night.

US data today includes updates on wholesale trade sales, the NY Fed's 1-year inflation expectations report and consumer credit.

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